A Personal Finance Blog for Malaysian: Good Debt vs Bad Debt

Tuesday, September 28, 2010

Good Debt vs Bad Debt

Good Debt = Help you to make more money, get richer and wealthier.
Bad Debt = Causing you losing money, get poorer and poorer.

By understanding the "After Tax Money", bad debt can be very bad, example:-

Credit card interest at 18% on outstanding consumer debts RM10,000 = RM1,800 per year. IF Your tax bracket 24%. therefore you need to earn RM2,368 in order to pay the interest ONLY.

Meanwhile, good debt helps you to increase your wealth by adding income or cash into your pocket. The interest is deductible and thus reduces amount of tax you need to pay.

Go for good debt. Stop getting any more bad debt.

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